FOREX-Euro bulls battle to take option barriers at $1.3500

* Euro needs to clear $1.3500 to extend six-month-long
recovery

* Yen slide on pause for now, but downtrend intact

* US GDP and Fed meeting loom, could be USD negative

By Wayne Cole

SYDNEY, Jan 30 Euro bulls were battling to break
14-month peaks versus the dollar on Wednesday and trip option
barriers at $1.3500, while the yen stayed under pressure on the
belief that true reflation in Japan would require a much weaker
currency.

Upbeat earnings results from Amazon sent its shares
up 10 percent after the bell and promised to extend the recent
rally in share markets, which could bode well for the global
economy this year. That benefited growth-leveraged currencies
such as the Canadian and Australian dollars.

Dealers were also looking ahead to the outcome of the
Federal Reserve's first policy meeting of the year at 1915 GMT.
The central bank is widely expected to reaffirm its commitment
to super-easy policy until unemployment falls sharply, which
could ease concerns about an early end to bond buying.

In contrast, the European Central Bank seems disinclined to
ease any further - giving the euro something of an yield
advantage. The single currency made the most of it, rising to
$1.3490 and having been as high as $1.3497.

"Speculators are trying to trigger option barriers at
$1.3500, which would force the holders to buy more euro and so
get another leg going," said a trader at an Australian bank in
Sydney.

"If it does break the big (chart-following) model funds
might also pile in and the rally becomes self-fulfilling."

He cited chart targets at $1.3548, $1.3614 and even $1.3835.

The euro also resumed its ascent on the yen to reach 122.36
yen, nearing Monday's peak around 122.90. Next stop
is the April 2011 high around 123.33.

The dollar tracked sideways on the yen at 90.76,
though analysts assume it is only a matter of time before it
crack the recent top of 91.25.

Chart support is seen around 90.00 with targets at 92.25 and
94.00, which would be a 38.2 percent retracement of the long
decline from the 2007 cycle peak around 124.16.

Selling the yen has been mostly a one-way bet since
mid-November, based on expectations that Japanese Prime Minister
Shinzo Abe would push the Bank of Japan into more aggressive
monetary easing to beat deflation.

Present BOJ Governor Masaaki Shirakawa, whose term ends in
April, is expected to be replaced with a much more dovish
governor, who could then bring forward any easing.

Aside from the Fed, investors are looking out for the first
estimate of U.S. fourth-quarter GDP due later on Wednesday, a
couple of days before the January jobs report.

Median forecasts are for annualised growth of just 1.1
percent, down from 3.1 percent in the third quarter. Such a
lacklustre result would likely support the doves at the Fed,
particularly as tax hikes enacted this month could hamper growth
for the first quarter as well.

The impact was clear in the Conference Board measure of
consumer confidence out on Tuesday which showed an unexpected
slide to 58.6 for January, its lowest in over a year.

Dec 9 President-elect Donald Trump said on
Friday he would name Andrew Liveris, chairman and chief
executive of Dow Chemical Co, to head the Manufacturing
Council, a private sector group that advises the U.S. secretary
of commerce.

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